Tata set to double investment in Jaguar Land Rover to £1.5bn
JAGUAR Land Rover parent Tata Motors is set to double its investment in the vehicle manufacturer in order to sustain its spectacular growth.
The Midland vehicle maker has announced third quarter profits of £559m and is a significant revenue generator for its parent company.
Reports in India show Tata Motors is now set to double its investment in the group from its current level of around £700-£800m a year to £1.5bn.
Tata said the challenge was to ensure JLR could sustain its high margins and it would only do this by having the best products.
JLR has been responsible for driving Tata Motors’ growth over the past 12 months, a strategy it had planned following its acquisition of the twin marques from Ford in 2008. Much of the success has been down to strong sales in the emerging markets.
A large part of the new investment is expected to be used for research into the new technology that will keep the company ahead of its competitors and strengthen its profile in the fast growing economies of the East.
C.R. Ramakrishnan, Tata’s chief financial officer, was quoted by Reuters as saying: “Over the past five to six years, JLR has spent around £700 to £800m annually on capital expenditure and product development. Going forward, we will double that. JLR spending will be in the order of £1.5 billion pounds each year,”
Ramakrishnan said the increase would apply in the current fiscal year ending in March.
JLR contributed 95% of Tata Motors’ profit in the third quarter (October to December 2011), with a profit margin of 20%, three times the profitability of Tata’s domestic business.
Much of the success is down to the popularity of the new Halewood-manufactured Range Rover Evoque. Sales of the compact SUV accounted for much of JLR’s revenue growth in Q3 with strong demand in both Russia and China where there is a strong premium for high quality British-manufactured goods.
The reports also suggested Tata has agreed a joint venture partner for manufacturing JLR cars in China. All that is awaited is consent from the Chinese government for the venture.
An announcement on the partnership is expected soon.
